There is little doubt that the federal homebuyer tax credit, which expires today after two years, has had an impact on the real estate market. Estimates from The National Association of Realtors are that two million Americans qualified for the credit in 2009, and 900,000 in just four months this year. It also approximates that 1.5 million people will take advantage of the $6,500 repeat buyer tax credit in 2010. The Census Bureau reported that home sales rose 27% last month, as buyers sought to get in under the wire and claim their credit.
The question is whether the end of the federal tax credit program will signal a dip in home sales. If a recent survey conducted by Prudential Real Estate and Relocation Services is to believed, that answer is, perhaps surprisingly, not really. According to the survey, 65 percent of homebuyers say that the tax credit expiration will have “little or no effect on their interest in purchasing a home.” Further, the survey found that 46 percent of homebuyers expect to see prices in their area increase during the next year; only 12 percent of those surveyed said they feared prices would decline in the same period.
Perhaps increasing the optimism (or simply as a means of circumventing any post-program depression), lawmakers in several states have, in recent weeks, introduced programs to offer tax credits in their state, the most aggressive of which is in California; the Golden State’s homebuyer tax credit offers a five percent or $10,000 credit (the lesser of the two) for qualifying purchasers between May 1 and January 1, 2011. Several other states, including Texas, New York, and Kentucky, offer tax credit programs ranging between $1,500 and $5,000.
In addition, real estate companies are getting in on the game. Coldwell Banker just introduced a program whose goal is to match the $8,000 credit—accomplished via a seller credit at closing of “3% of the purchase price, or up to $8,000, to buyers who sign a purchase contract between May 1 and July 31,” according to an article in the Chicago Tribune Unlike the federal tax credit, there's no deadline for closing a transaction and no income eligibility requirements.
For the entire Prudential survey, click here